After 10 years of incentive regulation, reliability has declined in Ontario. Regulators failed to enforce service-quality standards, and consumers are suffering as a result.
Understanding the New Energy Consumer
Unlocking value in the evolving energy marketplace.
• Standard provider: Any energy provider that opts not to move beyond the meter and instead continues its focus on differentiating within the meter, providing cost-effective, efficient, and reliable energy to as many consumers as possible.
• Marketplace advisor: Any energy provider that maintains primary ownership of consumer relationships and continues providing core energy services while working aggressively to build its reputation as a trusted advisor.
• Specialized provider: Any energy provider that complements its traditional commodity offering with specific value-added products and services, such as targeted offerings around electric vehicles or home area networks.
• Full-service provider: Any energy provider that offers a wide range of products and services, including home services and other beyond-the-meter offerings. Thanks to industry and technology convergence, a full-service provider may also venture into new categories of home services, including bundled services similar to current offerings from other home service providers—for example, telecommunications, home security, and cable companies.
Analysis of these trends suggests that utilities will ultimately choose a hybrid approach—combining two or more business models for different consumer segments or geographies. Some might choose to enter the beyond-the-meter market by offering value-added products and services across the offering spectrum. Others will opt to focus on commodity sales and asset management—allowing other providers to fill beyond-the-meter demand. Particularly in regulated markets with specific conservation targets, utilities might choose to assume an advisory role and connect consumers to other providers offering energy efficiency and conservation products and services.
Across the board, utilities and energy providers are likely to benefit from creating a partnership ecosystem to help engage consumers, build trust, and drive growth in the beyond-the-meter market. Extending beyond outsourcing, operational, and customer-facing partnerships, utilities and energy providers are beginning to collaborate with cities and municipalities, governments, and other stakeholders to drive the development of large-scale projects, such as intelligent cities.
In the meantime, a set of decision criteria provides guidance for utilities and energy providers in assessing potential business models. Broadly speaking, the criteria fall into four categories:
• Regulatory or market climate: The critical driver for any new business model is how and where an energy provider can capture new value. Assess the regulatory and market environment, including competitive threats, to build a beyond-the-meter business case in a given service territory. Also consider size; some utilities might lack the scale needed to build a meaningful market for beyond-the-market products and services.
• Technology: Consider the maturity of energy-related technologies—as well as target consumers’ willingness and ability to adopt them.
• Consumers: Evaluate the state of consumer relationships and the strength of the utility brand. Assess whether, and to what extent, consumers are open to purchasing non-traditional services from their utility or energy provider.
• Internal capabilities: Identify the internal capabilities that are required to deliver on new types of products and services, and then determine which capabilities already exist—and how quickly and effectively the organization can fill in the gaps.
However a utility or energy provider organizes its approach to consumers, it must choose its business models wisely. That combination of business models will become